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Why Isn't Berkshire Hathaway Inc. Buying More Internationally?

Photo: Matt Koppenhoffer, The Motley Fool.

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway   (NYSE: BRK-A  ) (NYSE: BRK-B  )  but it's not the only topic they discuss. This year, Buffett discussed Berkshire's international ,based on a question from Gregg Warren of Morningstar (NASDAQ: MORN  ) .

Following are my notes on Gregg Warren's question, along with responses from Buffett and Munger.

Gregg Warren: Berkshire has deployed very little capital outside the U,S. Is it because the U.S. is that much more attractive, or is it for other reasons?

Warren Buffett: We've never turned down a chance to make a significant outside-U.S. acquisition because of any feeling we'd want to be in the U.S. We haven't had as much luck getting on the radar of owners around the world as we have in the U.S.

Our best bet is to buy a business from the family of the founder or the founder themselves. That's our strong suit, and anybody in the U.S. with a business of size thinks of us, and a fair number would prefer us. I think we have some recognition outside the U.S. Iscar was 2006, I had never heard of the family, but he said we were those only one he'd consider selling to. If they [Iscar] didn't sell it to us, they weren't going to sell it. There's some awareness, but I'm disappointed we haven't done more outside the company.

I just spoke to the manager of Iscar -- they set a new record in April, and it won't be the last record they set. They sell this tiny little cutting-tool saw going into basic industry all over the world; people buy them cause they are using them, not because they look pretty in their office. They are seeing strength in the business that wouldn't suggest there's weakness in the industrial world. The people at Iscar are wonderful; the business is sensational. I wish we could find more like it.

This year, aside from yesterday's announcement, we have not been contacted by any significant [potential acquisitions] that made sense. We have heard from a fair number over the last five years, but nothing that's made sense. But we'll keep trying.

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  • Report this Comment On May 12, 2014, at 10:51 AM, NanushNanush wrote:

    Iscar is an Israeli company founded in a garage. I can see the cultural affinity between the families, in addition to the Buffet's business acumen.

    The founder, Stef Wertheimer is a modest, very idealistic man, with a strong, old fashioned work ethic and belief in vocational education and manufacturing.

    Long before the wunderkinds of Silicon Valley were building fancy campuses, Stef was creating art filled green industrial parks for his tool and die workers. Each park contains an art museum, open to the public. His philosophy is that the companies value is in training and keeping skilled and conscientious workers, and valuing their ideas.

    Their products include the most demanding hitech metalwork, like jet engine blades.

    It was Buffets first purchase outside of the US.

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Brendan Mathews

A Fool since 2005, Brendan is a research analyst on The Motley Fool's Stock Advisor newsletter. He enjoys scouring financial statements, pontificating on competitive advantage, and any outdoor activity.

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8/27/2015 4:00 PM
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